OUR INTERSTATE PROTECTIVE TARIFFS.

BY JAMES J. WAIT.

VERY four years, or oftener, the business of the country

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is disturbed by agitation of the tariff question. Politicians excite themselves to the borders of hysteria, and the press keeps the voters divided by party lines on what should be a purely economic problem. Such great public interest has been thereby aroused that it is surprising so few are aware that the railroads form practically a third house of Congress, and have established protective tariffs of their own. This has not been brought to public notice probably because the intricacies of the railroad question are so little understood, a discussion of the subject usually involving too many technicalities for the uninitiated. It has been the aim of our government to keep internal trade absolutely unrestricted, and while the most ardent protectionist would not dream of applying his principles to domestic commerce, the same railroads which have nullified the protective tariff upon many imports by means of discriminating rates, also maintain barriers between the States.

The statement that we have a protective system within the borders of the country, favoring one locality or individual as against another, of sufficient magnitude to be a restraint to trade, will doubtless be met with incredulity. Attention is therefore invited to some of the facts. It is probable that this state of affairs has been brought about, not by deliberate intent to accomplish the result as a whole, but by the strife of each carrier to secure business and protect itself from the extraordinary competition to which transportation interests are subjected. Until within a short time ago merchants who were injured satisfied themselves with an individual remedy by means of rebates or similar concessions, overlooking the fact that competing markets were probably accorded equal facilities; but now that freight tariffs are something more than the paper they are printed upon, their inequalities concern

ing localities are becoming more apparent to commercial interests. Since the Interstate Commerce law has become a menace to the shipper, and no protection to him against his neighbor who is not law-abiding, a more general remedy must be sought. We are all familiar with the maps issued by the passenger agents, showing that each has the "short" line, but only the few who are conversant with the details realize how cities have been moved about the map, and geographical distance annihilated by the changes in freight tariffs. A few examples* of these discriminations will make the foregoing clear.

The freight tariffs applying upon manufactured articles from the Ohio river to the Southeastern States are on a much higher relative scale than those applying from the Eastern seaboard. In some cases much shorter distances have actually higher rates.

This is the result of an adjustment reached nearly twenty years ago, providing for a division of traffic to restrict the former disastrous competition among the railroads in the territory south of the Ohio and east of the Mississippi river. While the agreement itself may not so state, there is fairly good evidence that the hidden basis was an understanding that the lines running coastwise should carry manufactured articles from Eastern territory, and that Western lines should carry provisions and grain products. To this end what are known as the "class rates" are so high from interior points that they are burdensome, and sometimes prohibitory. On the other hand the rates on provisions and grain products are made to encourage movement from the West. In some cases they appear unusually low when compared with merchandise rates.

The rates from Atlantic cities to Colorado and Utah are lower than from Detroit. Periodically they are less than from the Mississippi river.

The explanation offered is that the low rates are forced by water competition through the Gulf ports. The distance from Galveston to Denver is about the same as from the Mississippi river to Denver, so that they are a practical gift of 2,500 miles

Figures and tabulated statements are omitted for the sake of brevity.

free water transportation, marine insurance, and rehandling. These rates apply not only from the coast cities, but the cost of shipping to tide water is absorbed from points as far west as a line drawn through Oil City, Pa., and sometimes including Pittsburg. A similar condition affects Texas, with the addition that it has been further proposed to make rates from the East the same as those applying from Kansas City.

The rail and lake rates from New England to Duluth are only a little higher than to Sault Ste. Marie. What are known as Missouri-river rates apply from the head of Lake Superior to the far West.

If a merchant on the Missouri river freights his manufactured goods from the East via the Lakes, and makes a sale to a customer in Butte, Mont., the property must pay a toll, nearly equal to the cost of rail transportation from New York to Chicago, more than if the business had been handled by his Northern competitors. This is not balanced in corresponding territory. If he makes a sale in Salt Lake City the freight cost via the competing route is the same as his, so that to a point straight west of him he has no protection, while he may be barred out from competition at a point straight west of Duluth. This situation is the result of the policy of the roads whose termini are at the head of Lake Superior to control the business via that route. The president of one of them is said to have remarked that in a few years he would confine the merchandise business of the interior States to a line drawn through Sioux City. One of these roads has its own steamboat service from Lake Erie ports, and sometimes makes the same rates on heavy goods from the manufacturing districts of the Mahoning valley as are in effect from the Missouri river. If this continues there is little question but that the prophecy quoted above will be accomplished.

Points on the Missouri river from Kansas City to Omaha inclusive are grouped, the same rates applying in and out on through business. The average distance to Omaha on the north and Kansas City on the south from St. Louis is longer than the distance from Milwaukee to St. Paul. The average distance from Milwaukee to the Missouri river is just about the same as from St. Louis to St. Paul. Milwaukee rates are

one-third higher to the Missouri river than from St. Louis. St. Louis rates are five per cent only higher to St. Paul than from Milwaukee, which is about half the distance.

This situation was objected to as follows by the head of the freight department of one of the roads interested:

It is our opinion that the present adjustment is unfair and unwarranted, and we believe that the rates from St. Louis to St. Paul-Minneapolis should bear the same relation to the rates from Milwaukee as the rates from Milwaukee to the Missouri river bear to the rates from St. Louis to the Missouri river.

This seems a perfectly fair proposition, but it was defeated. Carloads of heavy goods manufactured at St. Louis pay one half-cent more freight to St. Paul than if shipped from Milwaukee. If shipped from Milwaukee to the Missouri river they are charged five cents per hundred more than if shipped from St. Louis, the relative distance and conditions being practically alike. A fraction of a cent per hundredweight is frequently sufficient to influence the sale of heavy merchandise.

The interstate Texas tariff provides very low carload rates upon over one hundred commodities without corresponding reduction in the less than carload rates, resulting in undue advantage to persons shipping in carload quantities, to the detriment of the small shipper. This situation is duplicated in Montana, Colorado, Utah, and to some extent to the Pacific Coast. It is peculiar to these localities, no such disparity existing in the East.

Some railroad officers call this Texas tariff "the Dingley bill applied to Texas" and "protection run wild," saying they would be glad to alter the discriminating rates but for the attitude of the Texas Railroad Commission, which has notified them that any change is punishable by drastic reductions of their local rates. The Texas Commission appears to be helping the big fish to eat the little ones, and evidently still believes the doctrine of State Rights, for it has intimated that any order of the Interstate Commerce Commission correcting this evil will be nullified through its control of rates within the State.

A prominent merchant recently testified that "a number

of failures of retail merchants in late years were due to overbuying. The insolvents say they were forced to overstock because of the (relatively) exorbitant freight rates on less than carload quantities. They are forced to purchase more goods than they require in order to get around the railroad tariff, which is almost prohibitive of small shipments of staple goods."

The San Francisco Call, under heading of "Higher Rates for Retailers," makes use of the following:

One of the most important actions taken at the recent meeting of the Rate Committee was the widening of the difference between carload lots and less than carload lots, to the advantage of the wholesaler and to the detriment of the retailer.

When we consider that by reason of long distance and expensive roadbeds the freight cost into these portions of the country from the manufacturing districts is sometimes more than the value of the goods, and that the differences between carload and less are frequently more than any profit obtainable by the dealer, the effect can readily be appreciated. The motive behind this adjustment may be imagined from the following: The freight rates from the East to a large territory beyond the Rocky Mountains are made by adding the rates to the Pacific Coast, which have been forced down by the Panama water competition, to the rates from the coast back to the objective point. This, of course, places a premium on goods shipped to the coast in carloads and reshipped back in small lots, or in mixed cars, as against small shipments from the East. The carload rates upon nails, fence wire, staples, etc., are the same. Generally speaking, the carload rates apply upon mixed cars of these articles all over the United States, from the Atlantic to the Rocky Mountains, and from the Pacific Coast east-bound; but to the Pacific Coast west-bound they are applicable upon straight carloads only of 30,000 pounds. Some retailers in this intermediate territory, who cannot afford to purchase at one time this amount of each of the above commodities, desired permission to apply the carload rate upon mixed cars. This seemingly innocent request was met by the following protest, bearing the names of eleven large houses:

We are advised that the proposition is before the Trans-Continental